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Thursday, January 7, 2010

Uh Oh, More Doom and Gloom Headlines....

We commented the other week that the widely held view that U.S. unemployment will remain high indefinitely appears inaccurate based on historical data. Still, no one seems to consider history and simply assumes the current state of affairs will continue.

A lead headline on Yahoo! Finance (YHOO) today reads: "Economists worry economy won't recoup 7 million lost jobs" - link here. The article opens with good news but then steers the reader toward the negative:
  • A two-year string of job losses appears to be near an end, if it hasn't ended already.
  • But most economists don't expect the employment picture to significantly improve anytime this year -- or over the next few years for that matter.
  • The unemployment rate, which stood at 10% in November, is expected to stay uncomfortably high for the foreseeable future. Some experts even suggest that the labor market won't be able to fully recover from the 7.2 million jobs lost since the start of 2008 before another recession and round of job losses.
While we understand times are tough and can't dismiss risk factors, we also try to live with our eyes wide open and consider both history and alternate, non-consensus view points. For interesting perspective on the Market, economy, and the consensus "new normal" view, we recommend reading Bill Miller's 3Q09 commentary (Chairman/CIO of Legg Mason Capital Management). While some discount Mr. Miller because of poor performance in recent years that ended his incredible winning streak of beating the market year after year, we believe he deserves respect and concur with his reasonable alternate economic perspective.

Yes, some job reductions continue and new hiring is tight, yet we see companies hiring:
  • Amazon (AMZN) appears to have more than 900 open jobs - link here.
  • Amazon Web Services, hub of "Cloud Computing" (seemingly everyone's favorite topic at present) appears to have perhaps 90 openings - link here.
  • Twitter has maybe 20 openings - link here.
And, "old economy" employers:
  • Kellogg (K) has appears to have 141 openings - link here.
  • Ford (F) has a number of openings - link here.
  • Johnson Controls (JCI) has 825 openings - link here.
Although the numbers may appear small relative to what was lost, we think baby steps are okay and see potential that many economists and mainstream media will, once again, be wrong (*recall how many said fallout from the real estate bubble would NOT lead to a recession).

Whenever more gloomy headlines come across, keep in mind many positive things that are happening: Internet traffic continues to grow like crazy (= rapid information flow/exchange, more productivity, new media forms, new business opportunities, etc.), E-Commerce holiday spending grew ~4% Y/Y per ComScore (SCOR), and even U.S. retail container port volumes are poised to increase (off easy Y/Y comparisons, but we'll take it). Indeed, we submit that life and business will progress amidst a relentless wall of worry.

Happy investing,

Jeffrey Walkenhorst

Disclosure: long YHOO.
© 2010 Jeffrey Walkenhorst
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